NVDA bears have been way wrong for years now. Still, the stock looks stretched.

Over the last two years, plenty of investors and analysts have argued that NVIDIA Corporation (NASDAQ:NVDA) was overvalued. Most of them have turned out to be wrong. NVDA stock has gained a stunning 738% over the period, 60% of that just since its Q1 earnings report in May.

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To put those post-report gains in context, NVDA stock has added roughly $35 billion in market value since May 9. That’s equal to the entire market capitalization of fellow chipmaker Micron Technology, Inc. (NASDAQ:MU). Just as stunningly, Nvidia stock now trades at nearly 54x next year’s consensus earnings estimates.

At the risk of being yet another analyst proven wrong by NVDA stock, the current price looks just too optimistic. There’s plenty of growth on the horizon for Nvidia. But price matters — and it’s getting harder and harder to justify the current price of NVDA stock.

Sentiment Toward Nvidia Stock

As impressive as the post-earnings run has been, it’s important to remember that sentiment toward NVDA stock hasn’t been rock-solid this year. It was barely four months ago that two downgrades from smaller firms sent shares tumbling. That decline came after the stock actually fellfollowing Q4 earnings, despite beating estimates.

Obviously, that opinion has swung sharply behind NVDA — and that could be considered a concern.

Analysts continue to upgrade Nvidia shares, and even one of the bearish firms (Pacific Crest) has reversed course. What might be considered a near-term problem for NVDA stock is that recent upgrades have come basically on no news.

Analysts are moving price targets simply to keep up with the market — not based on fundamentals. That kind of “thesis creep” sometimes implies a run closer to its end than to its beginning.Again, NVDA bears and skeptics have made this argument before and been wrong. I myself argued the run would top out when NVDA still traded in the $140s. But the old saw that “at some point there are no buyers” may come true for Nvidia stock soon.

Be Careful Out There

Meanwhile, the price here looks to be getting more than a bit stretched — and the arguments for that price are equally flimsy. In upgrading NVDA stock last week, Needham raised its target a whopping 54%, to $200 from $130. The firm cited a new deal with Toyota Motor Corp (ADR) (NYSE:TM) as a driver for its price target boost, and reiterated a Buy rating.

But the report also cited just a 35 cents-65 cents EPS benefit from the agreement. That’s a material boost to the firm’s full estimates of ~$5-$6 EPS in 2019/2020. It’s not enough, however, to come close to adding $70 per share to the fundamental valuation here. Nor does it necessarily support Needham’s whopping multiple of 40x 2020 earnings.

Reading recent coverage, it’s not hard to get the sense that there’s a bit of “thesis creep” when it comes to NVDA stock. In other words, NVDA bulls and analysts are fitting the facts to the price — and not the other way around. A SunTrust analyst who admitted to being “not early” to the bull case cited the company’s “culture of innovation” and “ecosystem of incumbency”.

After bulls cited automotive and data center business as drivers for NVDA stock — and both they are legitimate opportunities — AI suddenly has been added, as targets move toward $200.

Those opportunities are real. But this also is a stock trading at 12x revenue — a massive multiple for any stock, let alone a chipmaker. Nvidia stock is valued at somewhere around 27x 2020 earnings plus cash. At some point, price matters. And NVDA stock may be nearing that point.

Bottomline on NVDA Stock

Again, this argument has been made before, at far lower prices. And I did think Q1 earnings were stellar, and more than enough to turn bullish on Nvidia stock.

But NVDA has gained another nearly 50% on top of those post-earnings gains. Multiples are getting stretched. Competition will be fierce, with Intel Corporation (NASDAQ:INTC) looking to hold on to its data center business and using its Mobileye NV (NYSE:MBLY) acquisition to battle in automotive. Even with Nvidia’s myriad opportunities, it’s getting tougher and tougher to make the case here.

NVDA stock most certainly isn’t a short. But it’s also a story that may have played out — at least for now. Of course, that argument has been made before.

As of this writing, Vince Martin has no positions in any securities mentioned.